Kissei Pharmaceutical (TSE:4547) Will Pay A Larger Dividend Than Last Year At ¥45.00

The board of Kissei Pharmaceutical Co., Ltd. (TSE:4547) has announced that it will be paying its dividend of ¥45.00 on the 4th of December, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 2.8%, which is fairly typical for the industry.

View our latest analysis for Kissei Pharmaceutical

Kissei Pharmaceutical's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Kissei Pharmaceutical's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

EPS is set to fall by 3.0% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 37%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Kissei Pharmaceutical Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was ¥40.00, compared to the most recent full-year payment of ¥90.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.4% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Kissei Pharmaceutical has impressed us by growing EPS at 17% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Kissei Pharmaceutical will make a great income stock. While Kissei Pharmaceutical is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for Kissei Pharmaceutical (of which 1 is concerning!) you should know about. Is Kissei Pharmaceutical not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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